990310vJHedavcc.docx

March 10, 1999
Duane L. Heda
HC 87, Box 470
Featherville, ID 83647
Re:Case Nos. GNR-T-97-9 and GNR-T-98-18
EAS between Tipanuk, Boise River, Mountain Home and Treasure Valley Exchanges
Dear Mr. Heda:
The Commissioners requested that I respond to your letter dated February 23, 1999, regarding the public hearing that was held in Mountain Home on February 16, 1999.  Your concern about the failure to introduce the Commission Staff’s summary into the record is understandable and well-taken.  Normally the Staff summary is available to hand out to the hearing audience and such a statement is normally included in the record.  Unfortunately, the Staff summary had inadvertently been left in Boise and Commissioner Smith was unaware that the Staff’s summary was not available.  Because she was not aware that the summary had been left in Boise, she did not realize how important it was that Staff read its summary into the record and simply overlooked its inclusion.  Most of the Staff’s findings had been discussed during the question and answer period held prior to the hearing.
Moreover, Staff’s findings will clearly change.  Staff, Rural and U S WEST recently requested the technical hearing originally scheduled to begin on March 2, 1999, be rescheduled to allow the parties to further assess and analyze the costs and technical problems that would be created by granting extended area service (EAS) to either Boise or Mountain Home.  At the hearing several people testified they were encountering significant “busy signal” problems when trying to call long distance into Boise or Mountain Home.  This suggests that there may be capacity problems already existing in the system.  When Staff analyzed the costs discussed in Mr. Hart’s testimony (summarized in the document you received) it made several important assumptions regarding what facilities would be required to accommodate the different EAS proposals.  Rural disagrees with many of those assumptions and the associated costs.  Furthermore, the public testimony seems to support Rural’s assertion that Staff’s assumptions need to be changed.  If the costs are as Rural describes them, Staff’s findings regarding costs may be too low.  This means that the increases for residential and business rates quoted in the Staff summary you received may actually need to be much higher.  Correctly calculating the costs for providing EAS is critical to whether the requested EAS will be granted.  The Commission has previously denied EAS requests where the increased rates necessary to cover the costs outweigh the customer costs for simply continuing to use long distance.
Therefore, in response to both the public testimony and Rural’s assertions, Staff engineers and analysts are carefully reviewing Rural’s claims.  When that analysis is completed, supplemental testimony will be filed and made available to the public and a technical hearing will be held.  As a party of interest, you will receive a summary of that new testimony.  You can file additional testimony in response to the supplement.  Written testimony from the public is still being received and the Commission will consider that testimony in any decision it makes.  The Commission may also decide to hold an additional public hearing or public meeting to accept more public input.  
You also questioned how Mr. Hart determined the “community of interest” between Boise River and Mountain Home or the remaining communities within the U S WEST Treasure Valley EAS Region. One of the most difficult tasks confronting the Commission in recent history has been the evaluation of EAS requests.  Therefore, in evaluating EAS requests, the Commission examines the petitioning exchange’s dependence upon the requested exchange -- “community of interest.” That dependence is measured by evaluating several factors.  
Historical call volume (how many calls are placed from the requesting exchange to the requested exchange) and call distribution (how many customers are making those long distance calls) help determine whether there is a high demand for calling between the two communities.  Historic actual call volume and call distribution data are used; the Staff does not rely on anecdotal information.  These data predict whether the benefits of EAS will be shared by most customers or simply flow to a few high volume customers.  If few customers actually make long distance calls to another exchange, it is unlikely there is a community of interest justifying granting EAS.  
In addition, the Commission considers the distance between the exchanges and the presence of geographic or other physical barriers (like mountains, rivers, valleys) between each exchange.  It looks at whether both exchanges are in the same county or share the same school district.  It considers the petitioning exchange’s proximity to medical facilities and services and the willingness of customers to pay increased rates.  
Relying on these factors, Staff Analyst, Wayne Hart found a community of interest existed between Mountain Home and the three Rural exchanges of Tipanuk, Prairie and Boise River (Pine and Featherville). However, Mr. Hart also found that the calling data (call volume and call distribution) between the Boise River exchange(Pine and Featherville) and the Boise exchange or the remaining communities in U S WEST’s Treasure Valley calling area did not support such a finding.  That calling data indicated too few customers actually call those communities.  Mr. Hart did not base his findings on discussions with a few customers in the exchanges but on the actual calling patterns of all of the customers within the Boise River exchange.  I have included a copy of his testimony with this letter.  I call your attention to pages 5 through 15, which more thoroughly explain Mr. Hart’s findings in this matter.
I hope that this answers some of your questions.  Once the Staff’s investigation is completed and supplemental testimony filed, you will receive a copy of the Staff summary and are invited to file additional comments in response.
Sincerely,
Cheri C. Copsey
Deputy Attorney General
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